All the cool kids

2016-02-03 11am EDT  |  #gold

Gold has been in a bear market for the past three years. During this period, it has spent the vast majority of its time firmly stuck below the 200 day moving average.

There have been a few valiant attempts to poke its head above this level, but every time the rally was quickly snuffed.

With the recent move higher, gold once again finds itself flirting with the 200 day moving average. Although many technicians might be salivating at the chance to re-short gold on this bounce, I am not so sure it is a good idea.

Over the past couple of years the hedge fund crowd have all learned to hate gold. And why not? It has been going down nice and steady. The whole buy financial assets short commodities theme could be encapsulated with this one trade.

The problem is that this trend has changed. The market is waking up to the realization that surfing the Central Bank wave monetizing their balance sheet with stocks and other risky assets might disappoint. The Central Banks are losing control, and it is only a matter of time before something really big breaks.

Gold is hated at the exact moment where it is needed most. The potential for a face ripping rally is off the charts. I know I will seem like a nutbar, but I think a $500 up week is a real possibility. Don’t forget it was only a month ago almost no one could imagine stocks ever going down, forget about having the worst start to a new year in the history of markets. The financial system is extremely unstable. The situation can change with unprecedented speed.

Although the 200 day moving average has proved resistance in the past, for a bull market to start, we need to get above that level, and stay there. I believe we are entering a bull market in gold.

The cool kids always seem to be at the forefront of fashion trends. I could never count myself in that crowd, but I am pretty sure that if I get myself one of those actual gold shirts, I can get out ahead of the trend. What do you think? I know I might be the laughing stock for a bit, but trust me - it won’t be long until you see everyone in Mayfair and Connecticut wearing one. Buy it now before they sell out.

Thanks for reading,
Kevin Muir
the MacroTourist